CALA experts discuss brand affiliation vs. independent

CORAL GABLES, Florida — In the CALA region, a minority of hotels are branded (a bookend to what is happening in the U.S.), which can make negotiating with owners for a soft or hard brand more challenging.

Bill Clegg, regional director of franchise development at BWH Hotels, said those challenges can create a different dynamic of what is “discussible.”

“There’s a couple of things that are discussable,” he said. “For soft brands and traditional brands, there’s an entry fee to commit to the brand, and then there’s going to be ongoing fees… Royalty, marketing, technology, in our case, our soft brands tend to have much lower fees than our traditional brands and our core brands. So, you have those fees that are negotiable, that are discussable oftentimes, as an incentive. You can take a look at ramp-up fees to get somebody in and soften the early years.”

Then, it comes down to pitching the best fit for a potential owner, even if the ultimate decision is not to affiliate. 

“We love to model for a prospect, but what will ultimately cost them to go into a brand or not”? Clegg said. “We do an analysis of their distribution, their business mix, the benefits to them of a loyalty program, those costs and everything else and come back and put it down the paper. When this is a good idea for me, when this is not, and there are times when it’s not.”

Clegg was part of “The power of brand identity — affiliation vs. independence” panel at ALIS CALA by Northstar event last week at the Loews Coral Gables Hotel in Florida. The panel consisted of Clegg; Carolina Esconlan, senior director of owner relations, CALA for Hilton; Jason Gold, senior vice president of business development for Irving, Texas-based Highgate; and Maria Carolina Pinheiro, vice president of development, Latin America & Caribbean for Wyndham Hotels & Resorts. The panel was moderated by John Fareed, global chair of New York City-based Horwath HTL.

What CALA owners are looking for 

When asked what independent hotel owners are looking for, Pinheiro said her experience says it comes down to three things.

“What do [they] want? They want the loyalty program. Normally they say, ‘I already have 20 hotels. I have 30 hotels. What I need now is a loyalty program. I’m not going to create that.’ So, I need to join you because you have a very strong loyalty program,” Pinheiro said. “Number two, they want to be discounted OTA [access] because, with the large brands, we have a special commissions… Third, they want the training. They want to have the support of a brand that can help with training the people.”

Pinheiro said that also involves talking about what they don’t want.

“[They say] I’m not going to change my culture. I’m not going to change the check-in process... This is what normally they search for,” she said.

Escolan said negotiations and agreements have radically changed as well. The days of 40- to 50-year agreements are mostly gone in the region. Some are 10 years, but sometimes they don’t even last that long.

“We’re seeing now that we’re competing sometimes with agreements that have 10 years, but there are outs in year three,” she said. “So, we are competing against that already. It depends on the needs of the owner, brand, and site.

“Usually, for a franchise agreement, we’re going to push for 20 years and for a management agreement, like 10 years, but the terms and the exit clauses [are important]. Years ago… there was no way out. Now, people are getting [out clauses and exit clauses].”

Gold said using third-party operators in the region can benefit owners because “you get the best of both worlds.”

“You get access to all the brand-related resources, systems, personnel… But you’re also getting a broader perspective because we might already be operating in a given market, and we might be working with any of four or five or six different chains and affiliations,” he said. “So, you’re getting the information from a broader ecosystem that you can leverage from an operator standpoint.

“We obviously know you have to play in the brand box, but I think working with a third-party operator, you can poke a little bit of holes in that box sometimes and have more ways to ask for forgiveness rather than permission on certain things. We’re not afraid to take some of those risks.”